The two municipal councils asked last night how the Financial Secretary will compensate them for income lost due to the rate cut.
Mr Tsang announced a one-off concession of a 50 per cent cut in rates for the July-September quarter.
'Members of the public only have to pay 3.5 quarters' rates instead of four in the 1999-2000 fiscal year,' he said.
The cut will reduce government revenue by $1.8 billion.
Mr Tsang said rates were the taxes with the widest impact on the community and one of the most reliable sources of revenue.
Rating and Valuation Department figures show there are about two million domestic and almost 350,000 commercial and industrial tenants paying rates.
'Within the very tight fiscal constraints I am facing I have tried to find room to further relieve the burden of ratepayers,' he said.